As of January 1, 2019, Arizona’s “Mini-COBRA” requires small business offer separating employees continuing health care coverage. Businesses with less than 20 employees do not have federal COBRA responsibilities, however, this new law mandates that small employers in Arizona which provide certain benefits, such as group medical, dental and vision insurance, now must offer continuing coverage up to 18 months for employees separating from the company.
The Act is being dubbed Arizona’s “Mini-COBRA” law due to the similarities to the Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA), which is the federal law governing employers with 20 or more employees. While it is clear that the Arizona law will require small business to follow rules along the same lines of COBRA, we do not have all of the specifics yet. What we do know is that it outlines: the employer’s obligation to notify qualified beneficiaries of their rights within 30 days, the qualifying beneficiary’s requirement to accept coverage within 60 days and directions for making ongoing payments. We also know that it gives employers permission to charge a 5 percent fee above the actual plan cost for administering the option.
Important takeaways for small employers:
- In order for an employee to be eligible for continued coverage, they must have been covered under the employer’s plan for at least 90 days.
- If the employer changes plans or if premium rates change, as is common during open enrollment, qualified beneficiaries participating in continuing coverage will be given the same option to change plans as any regular employee.
- Employers must give participants 30 days’ notice prior to a plan benefit or premium change, which means plan modifications must be complete in advance of the 30 days.
Although the federal COBRA law enforces strict financial penalties on employers that fail to meet certain requirements, it is not yet known what penalties will be imposed by failing to comply with SB 1217. However, it is likely that third-party administrators that currently provide services for employers that have federal COBRA responsibilities, will also offer their services for SB 1217, meaning there will be help for small businesses to maintain compliance with the law. Stay tuned for updates as more information is learned about this new law.